Licensing a brand can be one of the most capital-efficient ways to grow. Instead of opening every outlet or manufacturing every product yourself, you allow a partner to use your trademark in return for royalties. In the UAE, however, the value of that arrangement depends heavily on the agreement behind it. Vague scope, weak quality controls, or overlooked tax issues can quickly turn a promising partnership into a dispute.
What a Trademark License Is
A trademark license is a written agreement under which the brand owner, the licensor, permits another party, the licensee, to use a registered mark for agreed products or services, in a defined territory and for a set period, usually in exchange for royalties or fees. Ownership does not change hands. That distinguishes a license from an assignment, which transfers the trademark itself. A Dubai café brand that allows a partner to operate two outlets under its name, for example, still owns and controls the mark. A detailed explanation of how a trademark license in the UAE works sets out further practical examples.
Register the Mark First
Trademarks in the UAE are governed by Federal Decree-Law No. 36 of 2021, with registration handled by the Ministry of Economy and Tourism. A licensor can only license rights it can prove it holds, so the mark should be registered, and in the right classes, before any agreement is signed. A founder whose logo is registered only for clothing would need to extend protection before licensing it for homeware.
The law also requires licenses of use to be recorded in the Trademarks Register. Recordal matters because an unrecorded license may not be effective against third parties, even if it remains binding between the parties themselves. Legal advice on recordal should form part of every licensing deal.
Scope, Territory and Exclusivity
The agreement should define exactly what is licensed: which products or services, which sales channels, and whether online sales are included. It should set the territory, whether a single emirate, the whole UAE or the wider GCC, and the type of license. An exclusive license gives one licensee sole rights within its scope, usually in exchange for higher royalties and often a minimum guarantee. A non-exclusive license allows several licensees and lets the owner continue trading under the mark. A fashion brand might, for instance, grant UAE retail exclusivity while keeping e-commerce for itself.
Royalties, Reporting and Audit Rights
Royalties can be structured as a percentage of net sales, a fixed fee, a minimum annual guarantee or a combination. The agreement should specify how net sales are calculated, how often reports and payments are due, the currency, interest on late payments, and how VAT is handled. An audit clause giving the licensor the right to inspect the licensee’s books is essential for verifying royalty reports.
Quality Control, Termination and Disputes
Quality control protects the reputation that gives the brand its value. Licensors should reserve approval rights over products, packaging and marketing, and the ability to inspect production. The agreement should list termination triggers such as breach, insolvency, or missed minimum royalties, with reasonable cure periods. It should also address renewal notice periods, a sell-off period for remaining stock after termination, governing law, the forum for disputes, and which language version prevails.
Tax Considerations
Royalty income is generally taxable business income. Corporate tax applies at 9% on taxable income above AED 375,000, and 5% VAT can apply to licensing fees, with place-of-supply rules relevant for cross-border arrangements. Free zone companies should not assume a 0% rate, as income from trademarks is generally not treated as qualifying income under the free zone regime. Transfer pricing rules may also apply where the licensee is a related party.
Common Mistakes
The most frequent problems are licensing an unregistered mark, leaving scope and exclusivity undefined, skipping quality control, failing to record the license, and ignoring tax treatment. Each can be avoided by registering first, drafting precisely, and having a UAE lawyer review the agreement before signing.
Conclusion
A UAE trademark license pays off when the groundwork is done before anyone signs: a registered mark, a tightly drawn scope, clear royalty mechanics, enforceable quality controls, and a tax position worked out early. Founders who plan to hold and license their brand through a UAE company, whether on the mainland or in a free zone, should pick a licensed activity that matches how the royalty income will actually be earned. For a sense of what that move looks like in practice, see how two Canadian founders set up in Dubai.
